Chicago’s City Council voted to permanently halt the 2028 phase-out of a lower minimum wage for tipped workers

Chicago has become the latest city to reverse course on banning the tip credit for minimum wage workers. Less than two years after voting to phase out the lower minimum wage policy for tipped workers — a policy that was set to fully take effect in 2028 — Chicago’s City Council voted to permanently freeze the implementation of the One Fair Wage Ordinance, capping the credit at 24% of the Illinois state minimum wage of $16.60.

Last July, Washington, D.C.’s City Council voted to reinstate the tip credit less than three years after residents voted to phase out the tipped minimum wage by 2027. In 2020, New York Gov. Andrew Cuomo eliminated the subminimum wage for some workers but not restaurant workers, and in February 2025, New York State legislators proposed banning the tip credit for restaurant workers – a legislative proposal that has been rejected multiple times over the years.

Federally, the U.S. Department of Labor withdrew the Biden-era 80/20/30 tip credit rule in December 2024 following a federal appeals court decision earlier that year that vacated the rule. This marked a return to the original tip credit regulations under the Fair Labor Standards Act. Employers can now claim a tip credit for tipped employees performing duties related to their tipped occupation without strict time limitations.

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In Chicago, the City Council’s vote faces legislative hurdles, as the Council voted 30-18 in favor of freezing the tip credit ban — below the required two-thirds vote to override a mayoral veto. Chicago Mayor Brandon Johnson has threatened to veto the measure, according to Chicago’s local Fox News station. Under Chicago’s local laws, the City Council can override a mayoral veto with 34 votes.

Mayor Johnson has stayed firm in his opposition to the controversial tip credit over the years, which has been framed by activist groups like One Fair Wage as a racial justice issue, since the lobbying organization has pointed out that nearly two-thirds of the city’s restaurant workers are Black or Latino.

However, the restaurant industry has long been opposed to both federal and regional tip credit bans, arguing that phasing out these alternative minimum wage policies for tipped workers would put financial strain on small businesses. The Employment Policies Institute has tied the 496 Chicago restaurant closures in the first half of 2025 back to the start of phasing in the tip credit rule.

“We are disappointed that Mayor Brandon Johnson is threatening to continue the policy that is causing his city so much pain,” Mike Whatley, vice president of state affairs and grassroots advocacy for the National Restaurant Association, said in a statement. “This failed policy experiment should be a warning for other cities and states considering tip credit elimination.”

Source https://www.nrn.com/restaurant-labor/chicago-becomes-the-latest-city-to-vote-to-bring-back-the-tip-credit